What Goes Up, Must Come Down?: Health-Care Market Sees Record Number Deals Close in 2021

With nearly 3,000 deals announced, 2021 proved to be a fruitful year for the health-care mergers and acquisitions (“M&A”) market. (Brown, Bloomberg Law). In the final quarter (“Q4”) of 2021, health-care M&A activity reached its peak  with the closing of 762 deals. (Herschman, Bloomberg Law). While Q4 recorded the strongest quarter of 2021, each quarter of 2021 closed north of 700 deals. Id.  Three sectors in particular saw massive increases in M&A transactions. Those sectors included life science and pharmaceuticals, health-care IT and software, and cannabis. Id. This article will analyze the factors that contributed to the successful 2021 fiscal year in these sectors and predict whether the success from these sectors will continue throughout the 2022 fiscal year.

The life science and pharmaceuticals sector took the crown for the most M&A deals in the health-care industry with 524 transactions in 2021. Id. The acquisition of Wilmington-based PPD, Inc. (“PPD”) by Thermo Fisher Scientific, Inc. (“Thermo Fisher”) was one of many notable deals in 2021 within this sector. (Haskins, NCBiotech). According to Thermo Fisher’s chairman, Marc Casper, this $17.4 billion dollar deal expands the value proposition for Thermo Fisher’s biotech and pharmaceutical customers by adding PPD’s leading clinical research services. (Still, WilmingtonBiz). In part, the demand for COVID-19 therapies and vaccines drove the increase in M&A deals in the life science and pharmaceutical sector. (Brown, Bloomberg Law). Companies like PPD, who played and continue to play a significant role in the development of therapies and vaccines, attract big companies, like Thermo Fisher, who wish to capitalize on their success. (Haskins, NCBiotech). With new strains of COVID-19 continuously developing, look for companies to continue to consolidate within this sector and cash in on COVID-19 therapies and vaccine development efforts.

While the life science and pharmaceuticals sector led the way for M&A transactions in 2021, the health-care IT & software sector saw similar success, closing the year with the second-most deals in the health-care industry with 422 transactions. (Herschman, Bloomberg Law). Transformative healthcare, such as telehealth, demonstrates an innovative practice that companies such as Amwell look to capitalize on and expand. (Jennings, Forbes). According to Amwell CEO, Roy Schoenberg, Amwell acquired two companies–SilverCloud Health and Conversa Health–in efforts to achieve “omnipresence” by using technology to care for patients throughout their entire care journey as opposed to virtual visits. Id.  As society becomes more and more dependent on technological innovations, the health-care IT & software sector looks to remain as one of the strongest performing sectors in the health-care M&A market throughout 2022.

The cannabis sector enjoyed a significant increase in deals from 2020 to 2021, jumping from 159 deals in 2020 to 281 deals in 2021. (Herschman, Bloomberg Law). The infancy of the cannabis market draws significant attention from big companies as this sector looks prime to take a significant leap as state regulations continue to become less restrictive regarding marijuana. In states with less restrictive marijuana regulations, big companies are seeking to expand their positions in the market, as was the case with the recent merger between one of the largest privately held cannabis companies in the US, PharmaCann Inc. (“PharamaCann”), and multi-state dispensary chain LivWell Enlightened Health (“LivWell”). (Businesswire). According to PharmaCann CEO, Brett Novey, this merger dramatically enhanced PharmaCann’s presence in Colorado and Michigan, the second and third largest cannabis markets in the U.S. Id. He added that LivWell’s strong core team and operational platform will facilitate PharamaCann’s expansion into new states. Id. If the trend in the relaxing of marijuana regulations continues, this sector could see another jump in M&A transactions in 2022.

Looking forward, the cannabis sector appears as if it will dominate the M&A market throughout the 2022 fiscal year as advocacy to relax marijuana regulations has not been limited to only state regulations, but also federal regulations. More marijuana-related bills were introduced in Congress in 2021 than ever before, including two new federal legalization proposals. (Le, The National Law Review). As midterm elections lurk around the corner, lobbyists are strenuously working to push policymakers to relax regulations around cannabis. (Evers-Hillstorm, The Hill). With momentum in their favor, companies operating within the cannabis sector will look to consolidate with smaller companies to maximize their growth potential.